A Quick Take on the 2018 Social Security and Medicare Trustees Reports

June 5, 2018

The Medicare Trustees’ report estimates that the Hospital Insurance (Part A) trust fund will be exhausted in 2026, three years earlier than projected last year. Most of the changes between last year’s report and this year’s come in the short term; still, the projected 75-year shortfall increased from 0.64 percent of payroll last year to 0.82 percent of payroll. The change in the exhaustion date means that lawmakers have less than a decade to deal with Part A’s shortfall. We will have more on the Medicare Trustees’ report in the coming days.

With regards to Medicare on the whole (including Part B and D), the Trustees project total costs will rise from 3.7 percent of GDP in 2017 to 5.9 percent by 2042 and 6.2 percent by the 2092.

via A Quick Take on the 2018 Social Security and Medicare Trustees Reports | Committee for a Responsible Federal Budget

The American Dream and Support for the Social Safety Net: Evidence from Experiment and Survey Data

June 5, 2018

I propose the status quo bias hypothesis, which predicts that housing wealth increases preference for status quo arrangements with respect to Social Security. I contrast the status quo bias hypothesis with the claim that housing wealth reduces support for social insurance, and test the hypothesis in two empirical studies. A survey experiment finds that homeowners informed about high historical home price appreciation (HPA) are about 8 percentage points more likely to prefer existing Social Security arrangements to privatized retirement accounts, compared to those informed about low historical HPA. Observational data from the 2000-2004 ANES panel show that homeowners who experience higher HPA are about 11 percentage points more likely to prefer status quo levels of spending on Social Security than those in the bottom HPA quartile. No significant HPA effects are observed among renters, and for other domains of social insurance among homeowners. The evidence suggests that housing wealth’s conservatizing effect should be interpreted as a status quo preference, rather than opposition to redistributive social policies.

via The American Dream and Support for the Social Safety Net: Evidence from Experiment and Survey Data by Weihuang Wong :: SSRN

The Effects of DACA on Health Insurance, Access to Care, and Health Outcomes

June 1, 2018

This paper studies the effects of the 2012 Deferred Action for Childhood Arrivals (DACA) initiative on health insurance coverage, access to care, health care use, and health outcomes. We exploit a difference-in-differences that relies on the discontinuity in program eligibility criteria. We find that DACA increased insurance coverage. In states that granted access to Medicaid, the increase was driven by an increase in public insurance take-up. Where public coverage was not available, DACA eligibility increased individually purchased insurance.Despite the increase in insurance coverage, there is no evidence of significant increases in health care use, although there is some evidence that DACA increased demand for mental health services. After 2012, DACA- eligible individuals were more likely to report a usual place of care and less likely to delay care because of financial restrictions. Finally, we find some evidence that DACA improved self-reported health, and reduced depression symptoms, indicators of stress and anxiety, and hypertension. These improvements are concentrated among individuals with income below the federal poverty level.

via The Effects of DACA on Health Insurance, Access to Care, and Health Outcomes by Osea Giuntella, Jakub Lonsky :: SSRN

Perverse Incentives: Why Everyone Prefers High Drug Prices — Except for Those Who Pay the Bills

May 29, 2018

Health care spending rarely follows an ordinary, rational model. Yet even in that context, prescription drug prices are rising at a puzzling rate. What is causing the phenomenon? Quite simply, incentives percolating throughout the prescription drug market push players toward higher prices. At the center, lies the highly secretive and concentrated PBM industry — middle players who negotiate between drug companies and health insurers, arranging for rebates and establishing coverage levels for patients.

Contracts between drug companies and the middle players are closely guarded secrets. The PBM customers, including Medicare, private insurers, and even their auditors, are not permitted access to the terms. And the middle players are not alone; everyone is feeding at the trough.

Markets, like gardens, grow best in the sun; they wither without information. Thus, competitive distortions and suboptimal outcomes are unsurprising.

Despite the extreme secrecy, details have begun to seep out — through case documents (including recent contract disputes among parties), government reports, shareholder disclosures, and industry insider reports. Piecing together these sources, this article presents a picture of incentive structures in which higher-priced drugs receive favorable treatment, and patients are channeled towards more expensive medicines. In exchange for financial incentives structured in different ways to appeal to hospitals, insurers, doctors, and even patient advocacy groups, drug companies ensure that lower-priced substitutes cannot gain a foothold. It is a win-win for everyone, except of course for taxpayers and society. This article also analyzes popular proposals that are unlikely to work and suggests approaches for aligning incentives.

via Perverse Incentives: Why Everyone Prefers High Drug Prices — Except for Those Who Pay the Bills by Robin Feldman :: SSRN

Economic Incentives, Disability Insurance and Labor Supply

May 17, 2018

I estimate the labor supply response after the implementation of a full population disability insurance (DI) reform in Norway. The reform implemented an economic incentive program to continually encourage DI beneficiaries to increase their labor supply, and the causal analysis finds positive intensive and extensive labor supply responses after the reform. The average working hours increased by an average of 4.5 percentage points, while the probability of working increased by an average of 0.6 percentage points. However, there is significant heterogeneity in the estimated effects, which are consistently higher for full than they are for partial beneficiaries. For 100 % beneficiaries, the working hours increased by an average of 10.6 percentage points, and the labor force participation of young men that claim full DI benefits increased by 3.9 percentage points. The results from the analysis indicate that economic incentives can mobilize the unused potential labor supply in groups of poor health; this makes a sound economic incentive structure essential to the long-term viability of the DI program.

via Economic Incentives, Disability Insurance and Labor Supply by Ragnar Alne :: SSRN

The Comparative Advantage of Medicare Advantage

May 17, 2018

We ascertain the degree of service-level selection in Medicare Advantage (MA) using individual level data on the 100 most frequent HCC’s or combination of HCC’s from two national insurers in 2012-2013. We find differences in the distribution of beneficiaries across HCC’s between TM and MA, principally in the smaller share of MA enrollees with no coded HCC, consistent with greater coding intensity in MA. Among those with an HCC code, absolute differences between MA and TM shares of beneficiaries are small, consistent with little service-level selection. Variation in HCC margins does not predict differences between an HCC’s share of MA and TM enrollees, although one cannot a priori sign a relationship between margin and service-level selection. Margins are negatively associated with the importance of post-acute care in the HCC. Margins among common chronic disease classes amenable to medical management and typically managed by primary care physicians are larger than among diseases typically managed by specialists. These margin differences by disease are robust against a test for coding effects and suggest that the average technical efficiency of MA relative to TM may vary by diagnosis. If so, service-level selection on the basis of relative technical efficiency could be welfare enhancing.

via The Comparative Advantage of Medicare Advantage by Joseph P. Newhouse, Mary Beth Landrum, Mary Price, Michael McWilliams, John Hsu, Thomas G. McGuire :: SSRN

Medical Mystery: Something Happened to U.S. Health Spending After 1980

May 17, 2018

The United States devotes a lot more of its economic resources to health care than any other nation, and yet its health care outcomes aren’t better for it.

That hasn’t always been the case. America was in the realm of other countries in per-capita health spending through about 1980. Then it diverged.

It’s the same story with health spending as a fraction of gross domestic product. Likewise, life expectancy. In 1980, the U.S. was right in the middle of the pack of peer nations in life expectancy at birth. But by the mid-2000s, we were at the bottom of the pack.

via Medical Mystery: Something Happened to U.S. Health Spending After 1980 – The New York Times